In the feet of the ancestors

Research reveals the power of innovation through tradition

What helps family businesses to achieve breakthrough products? Latest research by the Centre for Family Business within IEED is challenging conventional thinking on how innovation is best achieved – particularly when it comes to that mainstay of many economies, the family firm.

Professor Alfredo De Massis, Director of the Centre, and his colleague Dr Josip Kotlar have been using a case study approach to investigate why some family firms are able to excel in innovation – and why drawing on tradition can prove such an important element in that process.

“The literature on innovation is strongly orientated towards the future. Innovation managers are typically encouraged to downplay the past – to discard it in order to make way for the new,” says Kotlar. “In our view, this is more of a cultural bias within the field rather than an imperative or normative rule that has to be followed. The paradox in what we found is that the most innovative companies were those which were most strongly linked to their tradition.”

Family firms are, by definition, those in which tradition is strongest, argues De Massis. The values and beliefs of the founding family are often passed down from one generation to the next, shaping the ethos of the firm and the way in which business is done. Yet tradition can also be a handicap: family firms are sometimes accused of holding on too rigidly to their past, being resistant to change and reluctant to alter the status quo.

“Inertia and dependency on the past have been seen as factors that prevent innovation,” says De Massis. “What we have found, and what is really revolutionary, is that you can develop amazing new products by leveraging on your past. And our research in family firms shows that this is in fact a deliberate strategy. It is a different way of organising practices within the firm – a particular cultural approach and way of doing things.”

The exemplars

Within the researchers’ initial sample, two companies stood out for the way in which tradition was nurtured and harnessed in order to build the capability for innovation.

One of these, Beretta, has a history longer than most. This Italian firearms manufacturer has remained within a single family for 16 generations, and took its first recorded order in 1526, from the Arsenal of Venice. Now with more than 2,000 employees, Beretta is very much a global player. It produces both civilian sporting guns and military weapons, and supplies the armies of various nations, including the US. However, its headquarters and the heart of its operation remain firmly in Gardone Val Trompia, north of Brescia.

Beretta has built a reputation for regularly introducing new technologies. For example, it won the 2012 NRA Golden Bullseye award for ‘Shotgun of the Year’ from American Hunter magazine for its Beretta A400 Xcel Sporting, a semi-automatic shotgun used by clay shooters.

Also well-known, the second firm is considerably younger – now in its third generation. Vibram was founded by Vitale Bramani in 1937, after he had been involved in a mountaineering accident two years before in which six of his friends were killed.

The tragedy was ascribed in part to poor footwear, and Bramani’s response was to develop a new climbing sole, using the latest vulcanised rubber to give far better traction. In 1954, a group of Italian climbers made a successful ascent of K2 wearing Vibram-soled boots. The distinctive ‘Carrarmato’ – or ‘tank tread’ – sole has since become a mainstay of walking boots, and Vibram soles are used by more than a thousand footwear manufacturers.

The company is based in Albizatte in Northern Italy, but now manufactures in Brazil, China and the USA as well as Italy, producing a range of high-performance rubber soles and compounds, used in active sports and in various other settings.

Vibram has helped to pioneer the barefoot running movement, and its popular FiveFingers range of shoes, launched in 2005 as a more minimalist alternative to conventional running shoes, were designed mimic the sensation of running barefoot.

Key practices

In their analysis of what enables family firms like Beretta and Vibram to innovate through tradition, De Massis and Kotlar came to the conclusion that four specific practices were at the centre of how the families managed and encouraged innovation:

• Historical narratives

In both instances, the history of the firm and its traditions is actively communicated both to outsiders and, critically, to those within it. Websites, books, historical archives, multimedia and other techniques are used to continuously recall the past, so that the memories evoked become as strong for employees and managers as for the family. Beretta, for example, has a corporate museum housed in the oldest part of the company: an elaborate factory showroom, built in 1880 to welcome visiting customers.

“There is a very clear intention behind this: namely, that in order for the innovators within the company to understand the past and to translate and use it, they have to be culturally close to those past elements,” says Kotlar. “Typically the innovators are employees, not family members. They need to be immersed in an organisational climate that really encourages them. That’s why all these practices are aimed at making the past understandable and manageable for the innovators.”

• Retaining the ancestors

Notable past members of the family are also given a very visible presence within the company. “These firms tend to celebrate their ancestors and use symbols to put tradition into the minds of their innovators,” explains De Massis. “They tell stories about their ancestors, and hang portraits of them in the factory. So a whole new generation, all the family members, really share that kind of vision. They are very good at building the ancestor into a mythological figure.”

• Eliciting emotions

Events and shared experiences are used to instil the sense of tradition, ensuring it becomes part of the way of life for new generations and something to which they develop a strong emotional attachment.

In Vibram, the family have a tradition of hiking together on a mountain first conquered by their ancestor, and it was the desire of some members to do these hikes barefoot that proved the inspiration for the FiveFingers shoe – a product that has been a breakthrough for the company in terms of market revenues.

Likewise, at Beretta there is an annual summer retreat to the family villa. “This is a place that is strongly linked to the family tradition,” explains De Massis, “and they use that time to convey the values of the past.” Each new generation is also taken hunting with relatives at the age of around 15 or 16, almost as a ceremonial rite of passage.

“Habits like these eventually become the source of innovation, but without that intermediate step of eliciting emotions and forming a particular attachment to those habits, there would be no resulting innovations,” says Kotlar.

• Corporate governance

“We think of family governance as a set of practices and strategic initiatives that serve to create a policy of maintaining family values and identity and preserving the links with the past,” Kotlar explains.

“In both Beretta and Vibram, you can see a clear separation of family governance from business governance. There are more or less institutionalised processes of thinking strategically about who they are, what they are about and what they are doing. That happens both in the family and in the business.

“Of course, a family business has multiple goals: business goals of profitability, growth, etc, but also family goals. So without a clear governance body to think about what the family goals and needs are, and how to achieve them, the company could incur problems.”

So could other firms learn from these examples? The beauty of tradition as a source of sustainable competitive advantage is that it is not easily imitated – the tradition is particular to the company. Yet innovation managers from other companies can still learn from the principles behind this approach, says De Massis. “As long as a firm has some kind of tradition, whether in the firm itself or in the local region, innovation managers can imitate these practices which are applied naturally in the most innovative family businesses.”

Ongoing development

The study to date has won the pair, and their research co-authors Dr Federico Frattini (Politecnico di Milano) and Dr Antonio Messeni Petruzzelli (Politecnico di Bari), a ‘best practitioner-focused paper award’ at this year’s Family Enterprise Research Conference (FERC) held in Portland, Oregon in June.

However, it is only the starting point for a more extensive research programme that should throw further light on exactly what processes are involved, and whether the findings are more widely generalisable.

The research team plan to conduct further cross-cultural research, examining family businesses from various countries, including the USA, China and the UK. That, they hope, will provide important further insights into how tradition can be used to stimulate innovation.

To find out more about the work of the Centre for Family Business and the interests of its members, visit the Centre’s web pages.

What we have found, and what is really revolutionary, is that you can develop amazing new products by leveraging on your past. And our research in family firms shows that this is in fact a deliberate strategy. It is a different way of organising practices within the firm.